STEVE INSKEEP, HOST:
We got some idea last week about how voters feel about the extra taxes on the wealthy that were proposed. Washington state voters chose to keep their state's millionaire tax - income taxes on people making more than $1 million per year. California seems to have voted against a tax on the wealth - not the income annually but the total wealth of billionaires, although they're still counting votes out there. Gabriel Zucman is an economist who studies taxes on the super-rich, and he's on the line from Paris. Welcome.
GABRIEL ZUCMAN: Good morning. Thanks for having me.
INSKEEP: OK. So you wrote a book called "We Need To Tax Billionaires." There's your opinion, right in the title. What did you make of these two apparent results - income taxes, yes; wealth tax, no?
ZUCMAN: Well, I think there's a lot of demand for taxing the super-rich in the U.S., like globally, for the very simple reason that their wealth has exploded, and they pay very little tax. They pay much less tax, the billionaires in particular, than the rest of the population. Now, in California, the billionaires spent almost $400 million to defeat Proposition 40 - the billionaire wealth tax - so I'm not extremely surprised that it's heading for defeat. But I think that it will ultimately pass, perhaps in 2028 or later.
INSKEEP: Now, you mentioned $400 million spent to defeat the wealth tax. I guess, if we assume that that was an economically rational decision, that whoever spent the $400 million thought that they would be paying even more than that in taxes. You think that's right?
ZUCMAN: Oh, yes. They would have paid $100 billion, those California billionaires. So of course, 400 million is not a lot relative to that. But I think more fundamentally, they were concerned that even though this was a modest wealth tax of 5% one time on their wealth, that it would start the movement for a wealth tax at the national level and eventually an annual wealth tax.
INSKEEP: Now, let's talk this through. The Washington state thing was a little more familiar to people - an income tax on your reported income with some adjustments. If it's over $1 million, you're paying an income tax. People get that. The wealth tax is different. And help me understand this. The idea is it's too easy for a millionaire or a billionaire to evade the annual income taxes and make their income look like it's hardly anything, and so they pay hardly anything. But can a wealth tax really work, particularly if passed only by a single state?
ZUCMAN: Yes. It can. And indeed, the main limitation of the income tax is that when you are extremely wealthy, when you have more than $1 billion in wealth, it's very easy to structure your wealth such that - so that it will generate very little or, in fact, no taxable income. That's why the income tax is not enough. For the super-rich, you need a tax on their wealth itself. And it's doable if the rate is not too high. If you have a very high rate annually, of course, some billionaires will move, but with a modest rate, it can work. And of course, the billionaires - they always agitate, threat to leave, to relocate to low-tax states. But the academic research shows that this migration is not zero but tends to be very limited.
INSKEEP: I think you just said a very interesting thing there. If the tax is comparatively low, it could still bring in billions and billions of dollars, but it would be not so significant that a billionaire would change his or her life. Is that what you're arguing?
ZUCMAN: Yes. Exactly. That's because their wealth is so large now that even a relatively small tax can generate a lot of tax revenue. Just to give one example, in California, the 250 billionaires own about $2.3 trillion in wealth. That's as big as the total income reported by all Californian families on their individual income tax return. So you get as much money with a 5% tax on the wealth of billionaires as with a 5% income tax for everybody.
INSKEEP: What do you think about people who are not millionaires or billionaires but don't really like taxing the rich because they themselves are ambitious - they'd like to be a millionaire someday?
ZUCMAN: Well, if the billionaires pay more tax, it would make it possible for the rest of the population perhaps to pay a bit less tax or to benefit from more public services, which would make it easier for them to build wealth and become rich.
INSKEEP: OK. Economist Gabriel Zucman - he is in Paris. Thanks very much for your time.
ZUCMAN: Thank you.
(SOUNDBITE OF SONG, "MILLION REASONS")
LADY GAGA: (Singing) 'Cause you're giving me a million reasons. Give me a million... Transcript provided by NPR, Copyright NPR.
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